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The Oil Shock Model-Simplified

Discuss research and forecasts regarding hydrocarbon depletion.

Re: The Oil Shock Model-Simplified

Unread postby Outcast_Searcher » Tue 09 Aug 2016, 15:04:20

pstarr wrote:I know ennui, you have repeated your tired old saw a thousand times: let's all repeat it one more time. It's a supply glut!

But it is not. It is a demand dearth.

OK pstarr, with respect -- help me understand this please:

If it is a demand dearth, why is the amount of global oil consumption rising meaningfully every year since 2009?

If it is a demand dearth, why has the big oil price drop only occurred after significantly higher sustained production, since the basic global economic climate has consistently been fairly slow growth since spring of 2009 (overall)?

If it is a demand dearth, why are high consumption countries like the US and China seeing record quantities of new cars being bought recently, at record prices (implying burning more gasoline on average, which increases demand?)

If it were a demand dearth, I would expect to see a far more widespread trend of things that indicate lack of demand. Like people buying far less new cars -- or buying high mileage hybrids. Or driving far less, since they can't afford to.

The net increase in oil demand is even in the face of technology which is raising the global vehicle fleet average mpg significantly over time (i.e. US CAFE standards and fleet average mileage).

If it were a demand dearth, then the amount of oil consumed globally should be decreasing, to match the decreasing demand.

...

If you can clearly explain in simple econ 101 terms why what is going on in the real world of supply and demand represents a demand dearth, I'll take your claim seriously, and investigate this further. Otherwise, I just can't begin to buy it.

And claiming the ETP model says it must be so, etc. doesn't cut it, IMO. I'm talking about facts on the ground, not theories that say what must happen years or decades or months from now -- when those dire events never (historically, anyway) have materialized. IOW, I'm looking for evidence, not conjecture.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Oil Shock Model-Simplified

Unread postby ralfy » Tue 09 Aug 2016, 21:32:13

If production costs fall significantly and diminishing returns are reversed, then we'll know there's a glut.
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Re: The Oil Shock Model-Simplified

Unread postby Tanada » Tue 09 Aug 2016, 22:56:49

There are 50pages of ETP stuff on its dedicated thread, posting about it here is off topic and excessively irritating. Get on topic or get off the thread.
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Re: The Oil Shock Model-Simplified

Unread postby ennui2 » Wed 10 Aug 2016, 00:52:48

Tanada wrote:There are 50pages of ETP stuff on its dedicated thread, posting about it here is off topic and excessively irritating. Get on topic or get off the thread.


This forum software needs a like button.

:)
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Re: The Oil Shock Model-Simplified

Unread postby ennui2 » Wed 10 Aug 2016, 01:32:25

ETP isn't an oil-shock, because the "shock" is from a price spike. ETP is all about oil prices going DOWN not UP. That's why I keep pestering you about picking a narrative and sticking with it, since on the one hand you keep talking about the oil "shock" of $147 causing the credit crisis and then you talk about how ETP is now your shiny new holy grail.
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Re: The Oil Shock Model-Simplified

Unread postby Tanada » Wed 10 Aug 2016, 11:50:31

pstarr wrote:
Tanada wrote:There are 50pages of ETP stuff on its dedicated thread, posting about it here is off topic and excessively irritating. Get on topic or get off the thread.

Tanada, I bring up ETP because (at least to me) it makes sense, is worth defending and has applications to every other discussion here at peakoil.com. I don't see the Oil Shock Model having the same value. Are you willing to explain or defend it?


The ETP model has its own thread. Quite spreading your obsession everywhere else. This is Peak Oil dot cm, not ETP 24/7/365 forum, if you can't accept that you are free to leave any time.

This forum is for discussing ALL theories, not just any salesman's favorite money making publication. You have been warned, don't do something regrettable.
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Re: The Oil Shock Model-Simplified

Unread postby AdamB » Thu 11 Aug 2016, 12:47:32

pstarr wrote:
ennui2 wrote:
Tanada wrote:There are 50pages of ETP stuff on its dedicated thread, posting about it here is off topic and excessively irritating. Get on topic or get off the thread.


This forum software needs a like button.

:)

I was just looking for an explanation of the Oil Shock Model? Do you have one? In the barely two pages of discussion, with almost a dozen comments, no one seems able or willing to explain the Oil Shock Model. You'd think that after two pages and almost 2 years of heated discussion, somebody would make sense of this important concept. The Oil Shock Model.

ennui please do tell. What is this Oil Shock Model all about?


Chapter 1. Enjoy.

http://theoilconundrum.com/

A summary? It only works, sort of, if you keep making the numbers larger, to account for all the things it can't see in the past, can't see in the future, and the author wasn't willing to account for, even knowing in advance that ALL of these things were going to happen.

Knock yourself out, but based on the topics your university seems to consider of importance when it comes to "instructing" about, it might take awhile.
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Re: The Oil Shock Model-Simplified

Unread postby Outcast_Searcher » Fri 12 Aug 2016, 00:45:05

pstarr wrote: And price remains is at a historical high point.

So $40ish is higher than $140? Or $100?

Inflation adjusted, the price of oil since the 2015 plunge looks to be hovering near the low range of the price the last 40+ years.

http://inflationdata.com/articles/chart ... ces-chart/

How is that a "historical high point"?

pstarr wrote: Besides, one merely has to look at faulty previous predictions. This one for example:
Image

So, we appear to be well above the 2009 and 2010 estimate. So what is your point? If it's that oil demand forecasts are forever falling, that seems to be wrong.

https://www.eia.gov/forecasts/steo/repo ... al_oil.cfm

In my mind, you're not adequately answering my questions in terms of simple supply/demand. You're spinning a bunch of random data points into a meme that isn't there.

For one thing, the whole mainstream economic community agrees that the primary cause of the 2008-2009 crash was the real estate bubble. You keep ignoring that and acting like it was the 2008 commodity price spike (which hit lots of commodities, not just oil).

Feel free to keep pushing that narrative. IMO, it doesn't answer my questions, and your insistence that the world can't afford to buy oil products at current prices flies in the face of a lot of evidence you choose to ignore.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Oil Shock Model-Simplified

Unread postby radon1 » Fri 12 Aug 2016, 05:19:06

Outcast_Searcher wrote:For one thing, the whole mainstream economic community agrees that the primary cause of the 2008-2009 crash was the real estate bubble. You keep ignoring that and acting like it was the 2008 commodity price spike (which hit lots of commodities, not just oil).


Commodity price bubble was just as real as the real estate bubble, or any other bubble existing at that time.
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Re: The Oil Shock Model-Simplified

Unread postby shortonoil » Fri 12 Aug 2016, 11:41:04

Outcast_Searher said:

"If it is a demand dearth, why is the amount of global oil consumption rising meaningfully every year since 2009?"

Number one, consumption is not rising meaningfully. Between 1960 and 2005 consumption rose by 5.46% per year. Between 2005 and 2014 it rose by < 0.43% per year, or at 7.9% of its historical rate. By any measure conceivable demand is now pathetic at best.

The real question comes into play as to why we are seeing significant, and long term inventory builds. When crude, and finished product are taken into consideration they have been increasing for 2 1/2 years. This again like, the fall in demand, is a historical first. By ignoring the question as why this has never happened before, is to ignore the problem. There has never been a shortage of liquid hydrocarbons, and there still isn't. The world is likely sitting on as much as 2,700 Gb of remaining liquid hydrocarbons. The question is then why is it not being used at a rate similar to historic usage rates?

Obviously, oil is just not as valuable to the economy as it once was. If it were we would be seeing demand at 5.46% per year, not 0.43. This obvious contradiction may be being missed by those who do not understand that 1 +1 = 2. Most would like to know how long the petroleum industry can survive in this atmosphere of long term falling demand. Our guess would be until their present fields stop pumping oil.

http://www.thehillsgroup.org/
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Re: The Oil Shock Model-Simplified

Unread postby AdamB » Fri 12 Aug 2016, 11:58:42

shortonoil wrote:Outcast_Searher said:

"If it is a demand dearth, why is the amount of global oil consumption rising meaningfully every year since 2009?"

Number one, consumption is not rising meaningfully. Between 1960 and 2005 consumption rose by 5.46% per year. Between 2005 and 2014 it rose by < 0.43% per year, or at 7.9% of its historical rate. By any measure conceivable demand is now pathetic at best.


And you normalized for efficiency gains...how...exactly?
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Re: The Oil Shock Model-Simplified

Unread postby rockdoc123 » Fri 12 Aug 2016, 19:45:41

Number one, consumption is not rising meaningfully. Between 1960 and 2005 consumption rose by 5.46% per year. Between 2005 and 2014 it rose by < 0.43% per year, or at 7.9% of its historical rate. By any measure conceivable demand is now pathetic at best.

Ok you are clearly confusing increasing rate of demand versus increasing demand. From January 1994 to April of 2016 global crude oil demand rose from ~67 million bpd to ~96 million bpd. Demand has increased for oil, it has not decreased

When crude, and finished product are taken into consideration they have been increasing for 2 1/2 years. This again like, the fall in demand, is a historical first. By ignoring the question as why this has never happened before, is to ignore the problem. There has never been a shortage of liquid hydrocarbons, and there still isn't. The world is likely sitting on as much as 2,700 Gb of remaining liquid hydrocarbons. The question is then why is it not being used at a rate similar to historic usage rates? 

Well first off a rapid rise in supply is hardly a first given that from 1960 through 1970 global supply rose by 125% or 12.5% per annum. Secondly, demand never fell over any appreciable time period. What did happen, however, was that after many years of demand and supply ticking along together bouncing back and forth supply took a huge uptick starting in early 2014. The gap between supply and demand widened quickly but demand still kept chugging along in an upward fashion. This is shown quite well in this plot. That uptick coincides with huge successes in US shales coupled with the Saudis/Opec declaring they were not constraining production and the Russians also increasing.
Image

Obviously, oil is just not as valuable to the economy as it once was. If it were we would be seeing demand at 5.46% per year, not 0.43.

That is incorrect. Obviously oil is at least as valuable as it once was because global demand is greater. Any slowing of rate of growth in demand is related to economic slowing in some countries, but that does not mean their demand has decreased. The price is set by market conditions….more supply means it is a buyers market “sorry I’m not going to pay you $65/bbl because your neighbor will sell me an identical crude for $55/bbl”.

I’m afraid you are arguing that the tail is wagging the dog, something that is unlikely unless you are trapped on Bizarro World.
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Re: The Oil Shock Model-Simplified

Unread postby ROCKMAN » Fri 12 Aug 2016, 20:23:19

"...oil is just not as valuable to the economy as it once was..". I'm not sure how one would quantify such an conclusion even if it were true. I won't even try go play with any numbers. Even qualitatively how is it to be done?
Either oil is valuable or not. It's like how valuable is oxygen to life? A lot 30 years ago but less valuable today? So oil was of a certain value to the world's economies 30 years ago but isn't as much now?

Agriculture feeds the world...especially that of the US and the Ukraine. And that ag depends upon diesel which depends on oil. With out sufficient amounts of oil countless millions would suffer and many would die. Thus I would say oil remains EXTREMELY valuable to mankind.
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Re: The Oil Shock Model-Simplified

Unread postby ennui2 » Sat 13 Aug 2016, 11:38:24

And yet like any commodity during a surplus, cheap.
"If the oil price crosses above the Etp maximum oil price curve within the next month, I will leave the forum." --SumYunGai (9/21/2016)
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Re: The Oil Shock Model-Simplified

Unread postby ROCKMAN » Sat 13 Aug 2016, 12:24:16

"And yet like any commodity during a surplus, cheap." And since the current price of oil is significantly higher then the historic average it isn't "cheap" but rather expensive. IOW we don't have a glut of oil but a shortage. After all we all know that when there is a shortage of any commodity the price of it increases. Just as the price of oil has increased 15% from $39/bbl in 2009 to the current price of $44.50/bbl. Of course that's nothing compared to the 340% increase in oil prices during the current oil shortage to the price during the 1998 oil glut.

I'm sure everyone here appreciate you're keeping us up to date on the current oil shortage.
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Re: The Oil Shock Model-Simplified

Unread postby AdamB » Sat 13 Aug 2016, 22:23:34

ROCKMAN wrote:I'm sure everyone here appreciate you're keeping us up to date on the current oil shortage.


The data doesn't indicate shortage. It indicates glut. Here is the EIA, being their normal conservative selves, thinking that the glut would be worked off this year.

Image

And Art Berman's graph showing they were way conservative.

http://www.artberman.com/wp-content/upl ... 2016-1.jpg

Still looks like glut! And someone really needs to get on the horn to EIA and tell them to stop underestimating all this stuff, they must have some peak oilers on staff or something!
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Re: The Oil Shock Model-Simplified

Unread postby ennui2 » Sat 13 Aug 2016, 23:21:48

ETP and Rockman's "oil is actually expensive" are both coming from the same source, the desire to use semantics to somehow spin the status quo as somehow worse than it really is.

I just gassed up again for $2.09.

Image

Oil is NOT expensive.

And 10 years ago Matt Simmons' rhetoric was actually the INVERSE of Rockman's. Matt Simmons said that for the value of the work that oil does (as our energy slaves) that oil was cheap and it would still be cheap even if the price went up several fold.

Oh, now times have changed. Peak-oil is in a lull and some people just can't accept that.
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